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Where can I invest sale proceeds from property to save capital gains tax?

You can invest a maximum of Rs 50 lakh in specific bonds and investment should be made within six months from the date of sale.

ET Bureau|
May 28, 2018, 06.30 AM IST
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If the residential property has been held for more than 24 months, your entire capital gain may be exempt subject to condtions.
Query: I live in Chennai, have two flats and a share in a residential property. This property is now being put up for sale.

Where can I invest the sale proceeds from this shared property to save capital gains tax?

Ashok Shah, Partner, N.A. Shah Associates replies: If the residential property has been held for less than 24 months, you will be liable to pay short-term capital gains tax at the income tax slab rate applicable to you.

If the residential property has been held for more than 24 months, your entire capital gain will be exempt, if it is utilised for purchasing a house in India within two years from the sale of the shared residential property or for constructing a house in India within three years from the date of sale.

Alternatively, you can invest your long-term capital gains in certain bonds—issued by National Highway Authority of India, Rural Electrification Corporation, Indian Railway Finance Corporation and Power Finance Corporation. You can invest a maximum of Rs 50 lakh in these bonds and investment should be made within six months from the date of sale. These bonds have a lock-in period of five years.

Please note that if only a part of capital gains is utilised either for purchase/construction of house, or for investments into bonds, or both, then you will be liable to pay LTCG on the balance amount.

Query: I am a postgraduate medical student. I will be receiving a stipend of Rs 55,000 per month for three years. Will I be liable to pay tax?
Rakesh Bhargava Director, Taxmann replies: Scholarships granted to students to meet their cost of education are exempt from tax, according to Section 10(16) of the Income-Tax Act. If the stipend received by you is not in the form of a scholarship, you will be liable to pay tax on it. Such stipend income should be reported under the head ‘salary’, if there is an employer-employee relationship, and as professional income if there’s no such relationship.

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